This interesting article was in the Wall Street Journal today, titled “Google Slowly Moving Away from its “Addiction” to M&A Earn-Outs”. An interesting thought, but hardly believable. While I am sure that Google’s leaders have realized that they may have paid a little too much in some earn-out structures because they found out they were actually paying for their own goodwill, which accelerated the target’s success when taken under Google’s umbrella, I believe that this model will continue to be the favored structure of the M&A deals in the internet and tech space. Of course, this is because the main assets being purchased in most cases are IP-intensive - i.e., hard to value without performance-based results. Start-ups in this space just don’t have a track record to pay an up-front lump sum. Still, I realize where Google is coming from on this position, and there is certainly a case by case balance to be found between cash/equity payments and earn-outs, when the milestones reached for those earn-outs are difficult to discern between the target’s success and the goodwill of the purchaser.
(On another note, I have decided to start using the photography of my sister, an extremely talented photographer, for pictures on this site. She has taken amazing photographs from all over the world, and I would like to share them with the IP Prospective readers. I hope you enjoy them as much as I do. For her entire catalog, see her site at Captured by Leslie.)

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